15 June 2011

The greatest example of anticlimax in the English language, said William F. Buckley, was the final line in the unofficial anthem of his undergraduate college: “For God, for country, and for Yale.”

Buckley’s anticlimax now faces a challenge from an even shorter phrase: “The Obama Administration” is on the road to becoming the most anticlimactic expression known to man.

President Obama swept into office on a tide of Lincoln and FDR comparisons. A giddy press corps swooned every time he spoke; his cabinet was a ‘team of rivals’ like Lincoln’s. His mandate, the press said, was to be a transformative president, like FDR. The more sober said he would be a Democratic Reagan: just as the Californian led the country into a generation of conservative politics, so President Obama would lead Democrats into permanent majoritarian status.

This was the consensus of the mainstream press; it was also the opinion of the President’s inner circle. Based on that consensus, the President made the decisions which, if he fails of re-election in 2012, history will likely regard as the fatal mistakes of his term: he went along with the flawed and failed stimulus program the Democratic Congress put forward, and he pushed forward on health care reform before economic recovery was assured.

In reality, President Obama’s mandate was not to be a transformer; he was elected to conserve. In 2008 the independents who elected Obama by deserting the GOP were tired of the drama of the Bush administration and they were terrified by the financial panic that followed the failure of Lehman Brothers. What they wanted was another Bill Clinton: a calm and soothing figure who would feel their pain and tweak the New Deal/Great Society state model to make it a little more user-friendly and a little less bankruptcy prone.

Midway through 2010, President Obama looked less like Lincoln redux and more like a Clinton manqué. By the end of that year, the penultimate dissing of the President began; friends and foes began to ask whether President Obama might not be, gasp, the new Jimmy Carter.

Instapundit maestro Glenn Reynolds has been saying for some time that from where he sits, the Carter comparison looks like a best case scenario for this President. For all our sakes, I hope Glenn is wrong, but increasingly there’s another specter frightening the Obama administration: the ghost of Herbert Hoover.

Herbert Hoover (Wikipedia Commons)

Like Obama, Hoover was the child of a broken home with an unconventional background. He was far more widely traveled than most Americans in his day, and his time overseas made him a globalist in his thinking in many ways. His wife (Lou Henry Hoover) was unusually well educated and assertive — at a time when few women went to college, she graduated from coeducational Stanford with a degree in geology. Hoover was an unconventional candidate who came into office on a tidal wave of support. Hoover, Secretary of Commerce during the Roaring Twenties, had never held elected office before winning the presidency. His campaign went deep into enemy territory, winning over solidly Democratic states in what was still the deep blue South including (like Obama) Florida, Virginia and North Carolina. Hoover was the great progressive hope of his day — he had supported Teddy Roosevelt’s 1912 Bull Moose campaign and was seen as much more forward looking and progressive than the party machine. He ran on the most diverse presidential ticket until Barack Obama’s own election in 2008; Hoover’s running mate, Kaw nation member Charles Curtis, was the first Native American and the first American with significant non-European ancestry to serve as Vice President of the United States. Hoover continued to burnish his diversity credentials in the White House; he was the first president since Theodore Roosevelt to invite an African American to a White House dinner and he wanted progress on Native American issues to be a hallmark of his administration. Hoover was also deeply concerned about the health of the middle class and the condition of the poor. He was an early backer of the long term, low interest mortgage that became the cornerstone of middle class finance, and he came into office hoping that prosperity would eliminate poverty in the United States.

In office, Hoover showed many of the same foreign policy instincts as President Obama. He was a strong supporter of disarmament, focusing on naval buildups as the greatest danger of the day. He began the withdrawal of US forces his predecessors had committed in Haiti and Nicaragua, hoping to push the reset button on US relations with Latin America. He sought to avoid confrontational US statements and to downplay possible grounds for conflict. His strong humanitarian instincts (he had led efforts to relieve starving Europeans during and after World War One) made him reluctant to use force but also left him concerned about the well being of people in other countries.

But what worries — or should worry — the White House is this: despite his long record of progressive politics, his personal appeal and his sympathy for the downtrodden, President Hoover is best remembered for failing to master the Great Depression. Six months into his term, the stock market crashed; for the next three and a half years the economy continued to deteriorate. By the time of the 1932 presidential election, Hoover was so widely discredited in the minds of shell shocked voters that Franklin D. Roosevelt swept into office, ending a Republican domination of national politics that dated back to the Civil War.

The problem was not that Hoover didn’t try. He had long been known as a leading progressive, and in the face of the Depression he was ready to countenance a significant expansion of the government’s role. His Reconstruction Finance Corporation would be taken over by FDR; it lent money to distressed companies in an effort to jump start the economy. He proposed the creation of a federal Department of Education; he was willing to countenance significant budget deficits and supported important public works projects (like Boulder Dam) as a way of stimulating employment and rebuilding confidence in the economy.

None of it worked. The economy was suffering from a combination of domestic and international maladies that were not well understood at the time — at least not by the President and his closest advisers. Political constraints prevented the President from pursuing some useful ideas — like a moratorium on World War One debts that might have helped kick-start the European economy. As the political situation worsened and the panic grew, bad ideas — like the Smoot-Hawley protectionist trade bill — became harder to resist.

Misguided monetary policy at the Fed made things worse, and as the opposition party gained strength, Hoover gradually lost the authority to lead.

The Great Recession is not as crushing as the Great Depression, but President Obama’s problems in the face of economic turmoil are beginning to look Hooveresque. The stimulus program on which he hung his hat may, as its friends argue, have prevented an even worse economic debacle. Clearly, however, the $800 billion plus stimulus failed to jump-start an economic recovery. Many of the administration’s pet stimulus programs have joined Jerry Ford’s “Whip Inflation Now” buttons on the junkpile of history: green jobs, cash for clunkers, debt relief for homeowners, and now, by the President’s own admission, ‘shovel-ready’ infrastructure projects.

Like Hoover, President Obama now finds himself (at least temporarily) without the ability to shape national economic policy. His opponents in Congress will block the kind of second stimulus his instincts and allies propose, and the Fed is not at this point particularly impressed by the White House’s recovery plan and is acting on its own. Like Hoover, President Obama faces the possibility of a devastating second downturn due to economic problems in Europe — and like President Hoover, President Obama can’t do much to prevent it. Like Hoover, President Obama is harried by a domestic populist revolt against his leadership and the policies he supports and like Hoover, President Obama’s once unassailable popularity is being slowly ground down by economic bad news.

As President Obama struggles, again, to gain control of the economic conversation and relaunch his administration’s economic policy (how many times has this administration announced its determination to focus on job creation?) the similarities between these two idealistic and patriotic men begin to emerge. In both cases we have a President who thought that his mission was to remake the world, but who gradually discovered that the tools in his toolkit were no match for the problems he faced. With great intelligence and serious goodwill, both men set about to address the most important issues facing the country and the world — only to find that their chosen remedies failed one by one.

I am not convinced that the President’s political goose is cooked — yet. For one thing, luck can never be discounted. Recessions don’t last forever, anymore than booms do, and American capitalism is strong enough to stage a recovery in the face of poor policy. But luck aside, the President can still avoid the great mistake that finally wrecked Hoover: the failure to learn.

President Hoover brought some convictions with him to office about how the economy worked, how government worked, and what his role as President should be. As the Depression deepened, he did the best he could within those limits, but nothing seems to have made him reconsider the mix of progressive ideas that he brought with him to the White House. As months of failure and disappointment grew into years, he doesn’t seem to have questioned those core ideas or to think about ways in which the economic emergency might require steps that in normal times would not be taken. He not only failed to end the Depression; he failed to give people a sense that he understood what was happening. Over-optimistic forecasts issued in part to build confidence came back to haunt him. To the public he seemed fuddled and doctrinaire, endlessly recycling stale platitudes in the face of radically new economic problems.

That’s beginning to sound a little like the current President’s predicament. Unless Lady Luck should emerge from retirement to sprinkle some growth dust on the economy, the President could find himself looking more Hooveresque by the day. Worse, President Obama faces problems that Hoover did not have — notably the five shooting wars on his hands in Afghanistan, tribal Pakistan, Iraq, Libya and now, apparently, Yemen.

Lincoln, Clinton, Carter, Hoover: that is a trajectory no President should want — nor will the country benefit from 18 more months of Presidential subsidence. One hopes the White House realizes just how much trouble it, and we, are in.

- WALTER RUSSELL MEAD, Editor-at-Large of The American Interest magazine, Progressive, Yale University Professor, recognised as one of the leading authorities on American foreign policy, writes for several journals, magazines and newspapers such as Foreign Affairs, The New Yorker, The Washington Post, and The Wall Street Journal, registered Democrat, and Barack Obama voter and supporter, 7 June 2011

13 June 2011

When Government Jumps the Shark

Walter Russell Mead

In my last post, I wrote about “Fanniegate“, the scandalous goings on by well connected Democrats that trashed the nation’s financial system. It was not that Republicans didn’t join the fun or that Republican malefactors of great wealth weren’t abusing the public trust in other ways. The moral and intellectual meltdown of the American elite is a robustly bipartisan affair and there is plenty of mud to throw at all sides.

But Fannie Mae represents a special problem for the Democratic Party and Democratic ideas. It is not just a vitally important institution led by prominent Democratic figures and part of a broader Democratic patronage network; Fannie Mae is one of the original New Deal institutions and the vision it was intended to serve stands at the heart of the concerns of the Democratic Party of the 20th century.

The fall of Fannie Mae is bigger than just another politicos run wild scandal. It stands as one of several signs that our current way of life is reaching its limits and that big changes are on the horizon. The Fanniegate debacle tells us that the progressive ideal is in the process of jumping the shark.

Jumping the shark, as many readers know, is an expression from the wonderful world of TV. When the original premise of a show has gone stale, producers try to recapture audience interest by putting familiar characters in outlandish settings where strange things happen to them — notoriously, when Fonzie literally jumped overa shark as Happy Days moved into its sunset years. When something jumps the shark, the death spiral has become irretrievable; the show has nowhere to go but down.

The progressive ideal of the last 100 years is reaching that point. In its day the progressive ideal was a revolutionary and even a noble one. A bureaucratic and professional elite would mediate social conflict between rich and poor, improving the lives of the poor while engineering the best possible administrative solutions to pressing social problems. Keynesian macroeconomic management would ensure lasting prosperity; progressive taxation would spread the benefits of prosperity as widely as possible. Levels of education would rise as more and more Americans spent more and more years in school.

Progressivism held out the hope that capitalism, democracy and history itself could all be tamed by competent professional management. Victorian capitalism had been brutal, disruptive, competitive. Society became more unequal even as living standards gradually rose. Democracy was irresistible, but the masses were uneducated. The modern progressive era was born at times of great violence and upheaval. World War One, the Russian Revolution, the Great Depression, the rise of fascism, World War Two, the invention of nuclear weapons and the start of the Cold War: it was against this background that progressives sought to turn modern life into something safe and tame.

I cannot blame four generations of progressive intellectuals for trying to make life a little less brutal and unpredictable, nor should we overlook the successes they had. Nevertheless, the Fonz has left the building; the progressive paradigm today can no longer serve as the basis for sound national policy.

The life cycle of a governing political paradigm is different from the cycle of a TV sitcom. It takes more to sink a way of life than to sink a sitcom, and the aftermath is much messier. But to grasp what it means to say that progressivism is jumping the shark, let us look at the stages of life in a progressive government program.

In the first stage of a government program, there’s a terrible social problem that has people wringing their hands. Not enough kids are going to college. Middle class families can’t get home mortgages. The river keeps flooding the town. Sick old people who have worked all their lives are eating cat food in the hobo jungle.

The government offers a solution that will fix the problem at a relatively modest cost. It is the hero cutting the heroine loose from the railroad tracks as the train approaches. It is the Lone Ranger riding into town to fix the bad guys. The government program in this early stage is the Great White Hope: once we get it up and running, people believe, life is going to get better.

Often it does, and a well established and functioning government program makes itself very popular in the next phase. Retirees are cashing Social Security checks, and the cost to those still working is very low. More creditworthy families are building homes because federal market makers are enabling banks to lend more; more homes make for more construction jobs. Life is getting better — and as most people count them the benefits clearly outweigh the costs. In this second stage of life, the Great White Hope becomes the Great White Father in Washington, benignly scattering benefits among an adoring population.

The government program addresses the need it was intended to fill, and the citizens look to their representatives with gratitude and affection. Farmers pocket their subsidy checks, poor parents use their food stamps to feed the kids, first time homeowners get low rate mortgages for pennies down, and old people bask in the glow of Medicare. All is well.

Unfortunately the cycle continues.

In the third stage, the law of diminishing returns sets in. The Army Corps of Engineers has built all the really useful flood control dams, but there is a large bureaucracy committed to building more — and there is a large private sector lobby of dam construction firms that want new business. Perversely, as the value of new projects diminishes, the political forces pushing new projects grow stronger. Bureaucrats rewrite the guidelines, cost-benefit analysts start fudging the numbers to make bad projects look good, and the dam lobby pressures Congress to keep that money flowing regardless of those whiners and complainers mewling about environmental problems and other drawbacks.

At this point the program enters the third stage of life: it is now a Great White Elephant. It is a large and expensive program that does less and less good at a higher and higher cost. Fannie Mae stops helping creditworthy borrowers get affordable mortgages through simple and straightforward processes. Federal housing policy becomes increasingly complex as new layers and levels of subsidy and promotion are tacked on. As the incentives become increasingly misaligned, the country begins to over invest in housing; consumers start buying more house than they need because government support makes housing an attractive investment.

The Elephant process takes place in many ways. Health care programs become inflated with bells and whistles; programs originally intended to provide basic medical care gradually swell into huge and expensive monstrosities. Shouldn’t chiropractic care be covered? Psychiatric care? Acupuncture? And since government is paying for the care shouldn’t it regulate who provides the care through licensing procedures?

Costs go up, procedures become more complex; efforts to control costs lead to more red tape.

As life expectancy exploded in the last sixty years, Social Security has morphed from a modest little program aimed at helping people get through the last few years of life with a little bit of dignity into the idea that twenty years of healthy ease should be a social entitlement. Medicare covers more and more treatments for more and more people over longer and longer stretches of time.

Little by little, mission creep sets in. A powerful cluster of interests organizes around the government program. The real estate lobby looks for ways to extend Fannie Mae’s guarantees to more people.

Programs and subsidies become steadily more complex, less comprehensible. Successive waves of ‘reform’ generally make things worse as the special interests focus with increasing power and skill on warping the programs to meet their needs and goals.

The fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way. At this stage the government program has moved beyond being wasteful and has become unsustainable. Fannie Mae goes from providing mortgages to creditworthy households to providing vast numbers of mortgages to uncreditworthy households, poisoning the financial system with bad loans. Medicare is unsustainable in the medium term and hugely expensive day to day — even as the procedures and regulations of Medicare warp investment decisions across the entire health care system.

But even as these programs become unsustainable, they have become so powerful — there are so many interests and industries that grow rich on these programs, and so many families for whom these programs have become the cornerstone of what littlefinancial security they have — that they cannot be touched. One way to tell when an elephant has morphed into a shark: when pundits and politicians start describing a government program as a ‘third rail’: you touch it, you die.

The Great White Shark is a menace that cannot be controlled. The program has gone rogue: the Army Corps of Engineers isn’t just building pointless dams. It is building bad dams. The agricultural subsidies aren’t just encouraging farmers to plant wasteful crops; by subsidizing corn ethanol they are contributing to food price inflation that threatens political stability in countries like Egypt. But just as the programs are most in need of reform, reform becomes impossible. If you try to stop Fannie Mae from tempting poor urbanites into ruinous mortgages that will leave them worse off than before while bringing the global economy to the edge of ruin, the race lobby (aided and abetted by the real estate lobby) will attack you as a racist and an enemy of the American Dream.

The problem today is that we are looking not just at one or two government programs that have succumbed to elephantiasis or turned into sharks; the progressive complex of social and economic policy as a whole has reached this point. Today many of our New Deal and Great Society programs are either elephants or sharks. They either lead us to misallocate scarce resources in ineffective ways or they threaten us with ruin by becoming politically untouchable budget busters.

Progressivism itself, and not simply the individual government programs it spawns, is moving through the same cycle of life. The most urgent social problems that progressivism set out to solve have been dealt with. Child labor and lynch mobs are no longer common in the United States. The greatest natural and scenic treasures of the country are protected by the National Park system. Food is much less dangerous, buildings are better built, cars are safer, the air and water is in better shape and the charismatic megafauna (big interesting animals) have been saved from extinction. Many more people have much more access to education today than was true 100 years ago; ditto for lifesaving medical treatment.

The progressive vision morphed from Great White Hope and Great White Father into Great White Elephant over the years. Early progressives picked the low-hanging fruit; they addressed the most important problems that were most susceptible to progressive interventions. Increasingly they are left with more expensive, less effective approaches to big problems (like Obamacare) or the agenda moves from issues of great moral and political significance like equal rights for African-Americans to less consequential issues like wider social acceptance of the transgendered. To raise the percentage of young Americans attending college from 2 percent to 20 percent is a significant achievement; to extend it from 40 percent to 60 percent will likely cost much more and accomplish much less in terms of raising social productivity.

We now see the progressive agenda dealing with issues like high speed rail, where the gains are so small and the rationale are so weak from the beginning that the program is a white elephant before it is fully set up.

The fierce commitment of progressive lobbies today to dysfunctional institutions and programs has brought matters to a crisis stage; the progressive legacy is morphing from white elephant to shark. Fierce attacks on anyone seeking to reform dysfunctional institutions combine with unreasoning devotion to unsustainable entitlements. “Progressives” today are too often grimly determined to achieve two incompatible ends: an indefinite expansion of entitlements and benefits on the one hand — and the preservation and even the extension of inefficient organizations and methods on the other. Everyone must have a college education, but the archaic and inefficient organization of universities cannot be touched. Public services must be vastly expanded, but every effort to rein in pensions and benefits for government employees, or to trim the size of the public labor force through greater efficiency, must be fought to the bitter end.

Unfortunately, the process doesn’t stop here. When enough progressive programs have become both unsustainable and untouchable, we move to the final stage. It is bad enough when a government program becomes a shark; it is much, much worse when a social paradigm as a whole jumps past the shark stage. A cluster of unsustainable but untouchable policies and institutions sooner or later reaches the point when it no longer threatens the country with ruin at some indefinite point in the future: imminent ruin stares us direct in the face.

That is part of what happened in Ireland, Greece and Portugal, and what may yet happen in Italy and Spain.

Disastrous government policies became more politically entrenched even as they became more unsustainable until quite suddenly, they could not be sustained and the whole system came crashing down.

When that happens, what crashes is not just one program. A whole system, a whole social contract falls apart. And if the crashes in these peripheral European economies shook the EU and the world economy, a full scale meltdown in the United States would likely be a shock as profound as the 1929 meltdown. It wouldn’t just be an economic disaster for the United States; it would likely be a historical disaster leading to crisis, upheaval and war around the world.

That fifth and final stage — which one hopes we will never see — takes the transformation one fateful step farther. No longer just a great white shark, the progressive ideal would become a great destroyer, a mythical figure like the Great White Whale in Moby Dick. To pursue the whale is madness; Captain Ahab, despite warnings and omens, persists on his insane pursuit of the uncatchable ideal, the untameable beast. Disaster and bankruptcy loom on every side; still the captain continues inexorably on his course. In the end, when something cannot go on for ever, it comes to a stop. The whale turns on the ship and smashes it to pieces in the sea.

The Fonz could jump the shark and Happy Days would die a slow death as the air gradually leaked out of the show. Much more dramatic things happen when a social paradigm jumps the shark. We got a glimpse of what that looks like during the financial meltdown; we have seen other ships staved in by great whales around the world.

This must not happen in the United States. We cannot throw away the hopes with which we have been entrusted in a futile effort to sustain insupportable programs under the shadow of bankruptcy and collapse.

We are approaching the time when the false promises can no longer be sustained. There is a little time left. We have not, I think, quite jumped the shark yet. Reform is still possible, though the great white sharks thrashing around our boat are formidable — and hungry.

We can still act to conserve the essential accomplishments of the progressive era while preparing to move beyond it. But only aggressive and accelerating reform can make that happen. It needs to begin soon. The money is running out.

The political battles to change course and to tame or kill the sharks gone rogue will be tough, but winning that battle is much better than losing it — or out of cowardice failing to fight it. Jaws was a scary movie, but it had a much happier ending than Moby Dick.

The United States must tame and reform the programs and ideas gone rogue that hammer at the sides of our boat. We must impose our will on the fiscal chaos before the chaos works its will upon us.

The American government must not jump the shark.

- WALTER RUSSELL MEAD, Editor-at-Large of The American Interest magazine, Progressive, Yale University Professor, recognised as one of the leading authorities on American foreign policy, writes for several journals, magazines and newspapers such as Foreign Affairs, The New Yorker, The Washington Post, and The Wall Street Journal, registered Democrat, and Barack Obama voter and supporter

"There are always going to be bumps on the road to recovery,'' President Obama said at a Jeep plant in Toledo the other day. "We're going to pass through some rough terrain that even a Wrangler would have a tough time with.'' His audience booed. They're un-fire-able union members with lavish benefits, and even they weary of the glib lines from his 12-year-old speechwriters.

We're not on the road to recovery. You can't get there from here, as they say. Obama was in Toledo to "celebrate" the sale of the government's remaining stake in Chrysler to Fiat. That's "Fiat" as in the Italian car manufacturer rather than "an authoritative or arbitrary decree (from the Latin 'let it be done')," which would be almost too perfect a name for an Obamafied automobile. The Treasury crowed that Fiat had agreed to pay a whopping $560 million for the government's Chrysler shares.

Wow! 560 million smackeroos! If you laid them out end to end, they're equivalent to what the federal government borrows every three hours. That's some windfall! In the time it takes to fly Obama to Toledo to boast about it, he'd already blown through the Italians' check. But who knows? If every business in the U.S. were to be nationalized and sold to foreigners to cover another three hours' worth of debt, this summer's "Recovery Summer" would be going even more gangbusters. I'd ask one of Obama's egghead economists to explain it to you simpletons, but unfortunately they've all resigned and returned to cozy sinecures in academia.

The latest is chief economic advisor Austan Goolsbee, the genius who in 2007, just before the subprime hit the fan, wrote in The New York Times that this exciting new form of home "ownership" was an "innovation" that had "opened doors to the excluded" and was part of an "incredible flowering of new types of home loans."

Where have all the flowers gone? Not to worry. By now, some organization of which you're a member has already booked Professor Goolsbee to give an after-dinner speech at your annual meeting where you'll be privileged to get a glimpse of his boundless expertise for a mere six-figure speaking fee.

"I'm not concerned about a double-dip recession," Obama said last week. Nor would I be if I had government housing, a car and driver, and a social secretary for the missus. But I wonder if it's such a smart idea to let one's breezy insouciance out of the bag when you're giving a press conference. In May, the U.S. economy added just 54,000 jobs. For the purposes of comparison, that same month over 100,000 new immigrants arrived in America.

So what kind of jobs were those 54,000? Economics professorships at the University of Berkeley?

Non-executive directorships at Goldman Sachs?

That sort of thing?

No, according to an analysis by Morgan Stanley, half the new jobs created were at McDonald's.

That's amazing. Not the Mickey D supersized hiring spree, but the fact that there's fellows at Morgan Stanley making a bazillion dollars a year analyzing fluctuations in minimal-skill fast-food service-job hiring trends.

What a great country! For as long as it lasts. Which is probably until some new regulatory agency starts enforcing Michelle Obama's dietary admonitions.

Until then, relax. That bump in the road is just a quarter-pounder with cheese that fell off the counter on the drive-thru lane to recovery. Like every other blessing, we owe the Big MacConomy to the wisdom of Good King Barack. "This plant indirectly supports hundreds of other jobs right here in Toledo," Obama told the workers at Chrysler. "After all, without you, who'd eat at Chet's or Inky's or Rudy's? Manufacturers from Michigan to Massachusetts are looking for new engineers to build advanced batteries for American-made electric cars. And obviously, Chet's and Inky's and Zinger's, they'll all have your business for some time to come."

A couple of days later, Chet's announced it was closing after nine decades. "It was the economy and the smoking ban that hurt us more than anything," said the owner. But maybe he can retrain and re-open it as a community-organizer grantwriting-application center. The Bureau of Labor Statistics reports that the median period of unemployment is now nine months – the longest it's been since they've been tracking the numbers.

Long-term unemployment is worse than in the Depression. Life goes slowly waiting for a fast-food job to open up.

This is Main Street, Obamaville: All bumps, no road. But shimmering on the distant horizon, beyond the shuttered diner and the foreclosed homes, is a state-of-the-art electric car, the new Fiat Mirage, that should be wheeling into town in a half-decade or so provided it can find somewhere to charge. "We will be able to look back and tell our children," declared King Barack the Modest of his own candidacy in 2008, "this was the moment when the rise of the oceans began to slow." Great news for the oceans!

Meanwhile, back on dry land, a quarter of American mortgages are "underwater" – that's to say, the home "owners" owe more than the joint is worth. In Harry Reid's Nevada, it's 63 per cent. Perhaps Obama's Aquatic Bodies Water-Level Regulatory Authority, no doubt headed by Jamie Gorelick or Franklin Raines or some other Democrat worthy, could have its jurisdiction extended to the Nevada desert.

"Hope"? "Change"? These are the good times.

What "change" are you "hoping" for in Obama's second term?

The loss of America's triple-A credit-rating? The end of the dollar as global currency?

Or just a slight upward tick in the same-old-same-old multi-trillion dollar binge-spending? On what?

Random example from the headlines: The paramilitarization of the education bureaucracy. The federal Department of Education doesn't employ a single teacher but it does have a SWAT team: They kicked down a front door in Stockton, California last week and handcuffed Kenneth Wright (erroneously) in connection with a student-loan "investigation." "We can confirm that we executed a search warrant," said Department of Education spokesperson Gina Burress.

The Department of Education issues search warrants? Who knew? The Brokest Nation in History is the only country in the developed world whose education secretary has his own Delta Force. And, in a land with over a trillion dollars in college debt, I'll bet it's got no plans to downsize.

Nor has the TSA. A 24-year old woman has been awarded compensation of $2,350 after TSA agents exposed her breasts to all and sundry at the Corpus Christi Airport security line and provided Weineresque play-by-play commentary. "We regret that the passenger had an unpleasant experience," said a TSA spokesgroper, also very Weinerly. But hey, those are a couple of cute bumps on the road, lady!

The American Dream, 2011: You pay four bucks a gallon to commute between your McJob and your underwater housing to prop up a spendaholic, grabafeelic, paramilitarized bureaucracy-without-end bankrupting your future at the rate of a fifth of a billion dollars every hour.

In a sane world, Americans would be outraged at the government waste that confronts them everywhere you turn: The abolition of the federal Education Department and the TSA is the very least they should be demanding. Instead, our elites worry about sea levels.

Obviously, Mark wrote this before he heard the good news! Democrats are planning to introduce a new infrastructure bill - I think that it will be "The Third Infrastructure Investment and Recognition Of The First Glorious Two Years and Five Months in Which Good King Barack the Modest Has Deigned to Govern as President of 60 Million Wonderful, Empathetic, Liberal American-Citizens of the World and Rule over 246 Million Racist, Bigoted, Homophobic, Islamophobic, Xenophobic, Misogynistic, Bible- and Torah-Reading, Non-Austrian-Speaking, Simplistic Bitter-Clingers, who Prefer to be Known as Simply 'Americans,' Assuming that it Gets Through the GOP House that Nancy Pelosi Swore Would Remain in Democratic Hands before the Only-Known Tidal Wave Evidently-Not-Caused-By-Global-Warming, the TEA-Tidal Wave of 2010, and Passed the Shrunken Democratic Majority in the Senate and Good King Barack the Modest isn't Swallowed Up in a QuickSand Trap or Imprisoned in the Tower of London for, Once Again, Speaking over 'God Save The Queen,' (Yo, Barack, 'You're So Vain' was written for Warren Beatty!) or Telling Liz That She Must Be Willing to Return to the 1833 Lines in the Falkland Islands Act of 2011."

12 June 2011

“Reckless Endangerment”

A couple of weeks ago National Public Radio interviewed New York Times business correspondent and columnist Gretchen Morgenson about her recent book, Reckless Endangerment: How Outsized Ambition, Greed and Corruption led to Economic Armageddon, which she co-wrote with Joshua Rosner.
Let me quote two excerpts from the interview. Here is the first:

“[DAVE] DAVIES: What's fascinating about this story is that you have this entity [i.e., Fannie Mae], which you said became the largest and most powerful financial organization in the world, you had this entity, which has government guarantees and government subsidies, although perhaps indirect, but it engages in major political contributions and lobbying expenses. How big a player were they in terms of contributing to politicians and lobbying?

Ms. MORGENSON: They were very large. The numbers might not seem large in today's terms, but they were extremely shrewd and, you know, took great care, especially of the congressmen that were on the House Financial Services Committee and the senators on the Banking Committee.

They knew that these were very important people to their livelihood and to maintaining the government perquisites as they were.

One of the really big beneficiaries, albeit indirectly, was Congressman Barney Frank of Massachusetts. Back in 1991, when Congress was writing the legislation that would, you know, enhance or improve the oversight of Fannie Mae, or so they thought, Frank actually called up the company and asked them to hire his companion, who had just gotten an MBA from the Amos Tuck School of Business.

Of course the company was happy to provide a job for his companion and rolled out the red carpet in a series of interviews with a variety of executives, and it ultimately did hire the man. And he stayed there for I believe seven years.

So that was an example of the kind of thing that Fannie Mae would do. Now, when I asked Mr. Frank about this, I asked him, did it have any impact on his approach to the company. You know, was it a conflict? Did he feel that it had been a conflicted, put him in a conflicted spot? And he said absolutely not, that he didn't really remember being interested or having much to do with the 1992 legislation.

But the record shows that he was very aggressive and really tough on those who were testifying in Congress about reining in Fannie Mae and Freddie Mac. He was very aggressive to, for instance, the head of the Congressional Budget Office at that time, who was trying to call for increased capital requirements and to call for a focus on safety and soundness at Fannie Mae, that Frank really took him apart in testimony.

DAVIES: Right, and you write there were a number of occasions on which he defended Fannie and their record of promoting home ownership but in the end had a different view of the company, right?

Ms. MORGENSON: Well, after the taxpayers had to take it over, he, you know, came around, finally. But by then it was too late. He said: Well, we should shut them down. But, you know, it really was far too late, and he had been such a vocal supporter for so long that it was sort of an odd turnabout.”

Here is the second:

“DAVIES: This book is replete with examples throughout the '90s and 2000s of voices who saw this coming and alerted regulators - or in some cases, people in the regulatory structure who tried to warn us. And one of them I really found fascinating is this guy Walker Todd, this guy from the Federal Reserve Bank of Cleveland. And this - well, he found an obscure provision in a law that raised a red flag. Tell us that story.

Ms. MORGENSON: It was interesting. It was 1991. So, again, this is after the savings and loan crisis had shaken everyone's, you know, confidence in the financial - our financial system. There was a new law that was being written to beef up the FDIC's ability to take over failing institutions. It was a good law that was really necessary that came out of the S&L crisis, and it gave regulators more power.

So it was an interesting moment in the writing of that law, that there came a sort of an amendment that had been brought to the floor by Chris Dodd which enabled insurance companies, brokerage firms, non-bank financial companies to tap into the Federal Reserve's special powers in time of crisis.

What that means is that these firms that had not been able to gain access to Federal Reserve borrowings in time of crisis - insurance companies did not have access. Brokerage firms had not had access. It was really only banks that were able to call on the Fed in times of trouble. This small, unnoticed part of the bill that was carried by Dodd expanded the federal safety net to include these companies.

It was a moment nobody noticed, except for Walker Todd, who was a research fellow at the Federal Reserve Bank of Cleveland. He thought this was fascinating, because the law that this was buried in was supposed to, you know, restrain the ability of financial companies to harm the taxpayer and to create losses that would be funded by the taxpayer. So it was counterintuitive. It was a paradox to Walker Todd that this small thing was inserted into the bill.

He tried to write about it. He, in fact, did write about it. He discovered that it had been inserted by the financial services companies at their request, and he tried to publish a paper talking about this expansion of the federal safety net. He came up against a buzz saw of criticism from the Federal Reserve Board in Washington. They tried valiantly to prevent the Federal Reserve Bank of Cleveland from publishing Walker Todd's report.

They failed, happily, and the report was published. But it was very, very interesting the degree to which the Federal Reserve Board seemed to want to keep that little amendment under wraps and to keep it from having the sunlight shone on it by this report that Walker Todd had produced.”

Now, consider that the financial reform bill passed last year was called the Dodd-Frank bill. How does that make you feel?

By the way, I still believe that it should have been called Frank-N-Dodd. It's just a matter of time before we learn just how bad a monstrosity it really is so we might as well get used to thinking of it in the same way that we do Frankenstein.

Churchill once said, "Russia is a country with an unpredictable past." I can't help but think that he would say today, “The Democratic Party is a party with an unpredictable past and a predictable history.”

The virtue of patience sits heavily upon the mantle of those cursed with the task of writing about actual historical events for, paraphrasing Churchill again, history is kind to Liberals because they write it.

To understand the enormity and complexity of this exercise, one must first realise that to study an event of yesterday and a Liberal’s role in it, one must almost solely look forward and then bide her time until the future is the past and the unforeseen known. Only when the future becomes the past will the actions or inertia, thoughts or emotions, positions or theories, analyses or suppositions taken by Liberals today or yesterday or a decade ago be “known” regardless of how many press conferences you have watched with your very own eyes.

Liberals will write…and rewrite…and edit, if necessary…history in a manner that dictates that the past must be changed to protect the guilty, praise the incompetent, transfer blame to the mostly inculpable and smear the innocent all while proclaiming dissent is the highest form of patriotism except when dissent is expressed by anyone, who isn’t a Liberal.

According to Robert F. Kennedy, Jr, Conservatives killed JFK: "...Neither Beck, Hannity, Limbaugh, Savage nor the hate merchants at Fox News and talk radio can claim to have invented their genre. Toxic right-wing vitriol so dominated the public airwaves from the McCarthy era until 1963 that President Kennedy, that year, launched a citizen’s campaign to enforce the Fairness Doctrine, which required accuracy and balance in the broadcast media. Students, civic and religious groups filed more than 500 complaints against right-wing extremists and hate-mongering commentators before the FCC. The Dallas, Texas, airwaves were particularly radioactive; preachers and political leaders and local businessmen spewed extremist vitriol on the city’s radio and TV stations, inflaming the passions of the city’s legions of unhinged fanatics. There was something about the city — a rage or craziness, that, whether sensible or not, seemed to have set the stage for Jack’s murder…The Voice of America, half an hour after the assassination, described Dallas as "the center of extreme right wing"...The mercantile elite [sic] that ruled the city carefully cultivated the seeds of hate. Radical-right broadsides were distributed in public schools; the Kennedy name was booed in classrooms; junior executives who refused to attend radical seminars were blackballed and fired…Uncle Jack’s speech in Dallas was to have been an explosive broadside against the right wing...When public school P.A. systems announced Jack’s assassination, Dallas school children as young as the fourth grade applauded … Gabrielle Giffords lies in a hospital room fighting for her life, and a precious nine-year-old girl is dead along with five others. Let’s pray for them and for our country and hope this tragedy prompts another round of examination of conscience." No, No, No! That's not a Commie over there! That's Darth Vader Cheney standing behind the fence behind the grassy knoll.

Not only did Conservatives assassinate JFK, they tried to assassinate General Edwin Walker in Dallas in April 1963, who was a right-winger, espoused views that were frequently diametrically opposed to Kennedy's, and Richard Nixon, who started the Environmental Protection Agency, which is giving us all of this cap-n-trade crap by stealth.

Republicans love Wall Street—oh look, Wall Street just made historic campaign contributions to Obama; he must be really cool.…

As Jane Fonda said, "We understand that Nixon's aggression against Vietnam is a racist aggression, that the American war in Vietnam is a racist war, a white man's war... We deplore that you are being used as cannon fodder for U.S. imperialism." Just ignore the fact that JFK started the war. LBJ sent in hundreds of thousands of grounds troops. Nixon ended the war. Ford removed the last soldiers and personnel. Meanwhile, back at the Potomac Swamp, the Democrats were defunding the war while hundreds of thousands of Americans were in the jungles of Southeast Asia fighting for their lives. But, get your eye on the left shell and remember that Vietnam was a Republican War.

Republicans hate the poor because they’re trying to block government policies promoting easy mortgages.… Oops, I wonder why the economy just tanked.

It’s because Bush drove it into a ditch! It was certainly not because Carter pushed the Community Reinvestment Act nor because Clinton pushed public-private partnerships and his Homeownership Strategy nor because Andrew Cuomo, while Secretary of HUD, announced that he had transformed the agency into an affirmative action programme, nor because Janet Reno and Eric Holder threatened to sue banks for redlining nor because the Federal Reserve Bank of Boston put out a bogus study that tried to prove that banks were engaging in discrimination nor because James Johnson and Franklin Raines fought off oversight of Fannie Mae while committing fraud and raking in hundreds of millions of dollars. Look over there! It's a bird! It's a plane! It's Nancy Pelosi and Barney Frank on a broom made for two!

Enron collapsed and Paul Krugman says it’s Bush’s fault. Krugman was paid by Enron and Bush wasn’t? Didn't Gore bring Kenny Boy to the White House to discuss, develop and plan the implementation of cap-n-trade long before Bush enter the White House? By the way, have you noticed how toned the First Lady's biceps are lately?

Rachel Carson and environmentalists lied about DDT and tens of millions of black Africans died. Bush lied, kids died! … Obama lied about "days, not weeks", men, women, and children died and terrorists received arms. Obama lied about the stimulus and the economy died.

Oil prices went up under Bush—it’s his fault—he’s an oilman! Oh but then oil prices went down under Bush.… Hey, look over there! A shiny object!

Bush is a deregulator. Democrats believe in regulations. Clinton deregulated Wall Street. He began gunning for Glass-Steagall Act as far back as 14-15 December 1992 at the Clinton-Gore Economic Conference in Little Rock, Arkansas, overruled the suggestions about regulating derivatives made by his own CFTC chair, Brooksley Born, and signed the Financial Services Modernisation Act of 1999 repealing Glass-Steagall. Of course, George W. Bush added more than 70,000 new regulations to the CFR and signed Sarbox into law, which added more regulations on Wall Street. Clinton deregulates Wall Street. Bush regulates Wall Street. But, Bush is the deregulator of Wall Street. Go figure.

In other words, “We didn’t do it. He did it and he went dataway!”

Welcome to the Predictable History of the Unpredictable Past of the Ever Predictable Democratic Party!

As a stickler for fact and evidence, I have to admit that, while Liberals generally frustrate me to no-end with their illogical arguments (Bush is a liar: He lied about WMD. Bush isn’t a liar: He said Clinton left him a surplus. Which is it? Liar? Truth-teller? Pick-n-choose?), I admire their breathtaking chutzpah.

Only a Liberal will lie to you with a straight face and believe his lie as it leaves his lips when he says: “Bush is responsible for the worst recession economy since the Great Depression. He deregulated Wall Street. He didn’t pay for Medicare Part D. He didn’t pay for either illegal war. His tax cuts caused the 'Great Recession.'”

Let’s take these one at a time to see how incredible they really are:

1. “Bush is responsible for the worst recession economy since the Great Depression.”

A couple of points:

First, Democrats always charge Republicans with causing the worst recession since the Great Depression.

When running for president in 1991-92, Bill Clinton and other Democrats were decrying all of the new Hoovervilles popping up around the country and the cataclysmic 15,904% unemployment rate.

"The average American expressed more pessimism about the future than at any time since the Great Depression."

"There is no question but this is the worst economic time since the Great Depression."

"Sluggish economic growth this year will cap the worst three-year period centered on a recession since the Great Depression."

"Forecasts for a weak recovery...suggest the period...will be the worst for the economy since the Great Depression."

"....the worst plunge since the Great Depression."

"The banking industry has plunged to its lowest point since the Great Depression."

"This is the most severe economic dislocation we've had since the 1930s. Few are immune."

"It's not a recession, it's a depression."

"….with the US economy locked in a recession and more people out of work since the Great Depression."

"....the worst (retail) sales period on record since the Great Depression."

"This recession is hitting white-collar workers more heavily than any since the Great Depression of the 1930s." FN1

Since I was still living in Britain in 1991, I would appreciate it if any of you could send me photographs or videotape of the soup lines and Bushvilles from the early 1990s. Thanks. Oh, and an extra-special, double-expresso thanks to Liberals, who can find the one that allegedly had more than 100,000 people living in it….ON THE MALL IN FRONT OF THE LINCOLN MEMORIAL. BIG, SLOPPY KISS.

Secondly, people are correct when the say that the economy is the worst since the Great Depression….NOW, but it wasn’t in 2008. The 1981-82 recession was worse in almost every economic category in terms of contraction, unemployment, etc.

2. “He deregulated Wall Street.”

The next time that a Liberal tells you this, hit him over the head with a cricket bat.

There are many, many things about which to be angry with George W. Bush. The deregulation of Wall Street is not one of them.

In fact, deregulation, Wall Street and the Democratic Party go together like Michelle Obama on a tamale (h/t Barack).

In December 1992 at the Clinton-Gore Economic Conference in Little Rock, Arkansas, Bill Clinton and Alan Greenspan, among others, discussed derivatives and the “dinosaur” Glass-Steagall. It was Clinton, who refused the requests of his own CFTC chair – Brooksley Born – to regulate derivatives, at the behest of Alan Greenspan, Robert Rubin, and Laurence Summers, which led to the creation of the $1.6 quadrillion behemoth CDO market. It was Clinton, who signed the Financial Services Modernisation Act of 1999. On the other hand, George W. Bush signed Sarbanes-Oxley Act into law, which added greatly to disclosure rules and personal liability for directors and management, among many others.

3. Gotta run, but I’ll be back.

In other words, whether or not a Democrat had anything to do with, say, a particular piece of legislation like the CRA or administrative regulation (HUD) or mortgage credit qualification changes (Fannie Mae, Freddie Mac) or failure to regulate derivatives (Brooksley Born) or repeal of Glass-Steagall (Clinton, Johnson, Gore, Summers, Rubin, Greenspan, Dec ’92) will depend on whether it causes an unmitigated disaster in the future.